A Credit Card Dilemma

I just came across an interesting credit card dilemma on Consumerist.com. A reader writes to say that she and her husband were trying to negotiate a lower rate on their credit card. Their rate had reached a whopping 28 percent. The card issuer, the reader said, offered them a 6 percent rate under its hardship program if they closed the card. But the reader was worried about how that would affect her credit score.

From covering the credit card industry, I know that your credit utilization ratio affects your credit score. That ratio tells you how much of your available credit you have used. If you have used a high percentage, then your credit score will drop. But the calculation of credit scores is tricky and depends on many factors. So how this particular consumer would be affected by closing down the card is hard to tell definitively. Still, it's an interesting case study.

Have any of you had similar deals proposed by your credit card companies? Please let us know.

Oh, please. This is a no-brainer. At the risk of sounding like Michele Singletary, if these people have so much debt that they need to negotiate down their interest rate, (i.e., they are carrying enough debt from month to month that it is not possible to bite the bullet and pay off the entire debt in 2-3 months), the most important thing is to get the debt retired. 28% interest vs. 6% interest? Pay off the debt. The hit to your credit score from closing the card won't be any worse than the hit from having too much debt, past due bills, etc.